Transportation stocks have been among the top performers of 2008. The outperformance of the Dow Jones Transportation Average (^DTX) has continued in May, meriting further examination today.

The following chart shows the relative outperformance of the ^DTX versus the S&P 500 Index (SPX) since the beginning of 2008. ^DTX percent change performance is in Blue; SPX performance is in Red.

Dow Jones Transportation Average versus S&P 500 Index


We have also recently discussed how the NASDAQ 100 (NDX) has strongly outperformed the broad market indices since the March bottom, and also since the April Google (GOOG) earnings report.

As the following chart shows, the Dow Jones Transports (Blue) have actually kept pace with the NASDAQ (Red) since the March bottom, further showing the strength of this uptrend.

Dow Jones Transportation Average versus NASDAQ 100 Index


The ETF IYT (iShares Dow Jones Transportation Average) is a good proxy for this index, whether through options trading or buying the ETF outright. As you can see below, the Top 10 Holdings are heavily weighted currently to Railroad and Shipping companies.

IYT - iShares Dow Jones Transportation Average - Top 10 Holdings as of 3/31/08

BURLINGTN N SANTE FE BNI 9.23%
C.H. ROBINSON WW CHRW 5.11%
C S X CP CSX 5.59%
FEDEX CORP FDX 9.26%
LANDSTAR SYSTEM LSTR 5.09%
NORFOLK SO CP NSC 5.03%
OVERSEAS SHIPHDLG OSG 7.00%
RYDER SYSTEM INC R 5.83%
UNION PACIFIC UNP 12.50%
UNITED PARCEL SVC UPS 7.30%

The continued strength of Transportation stocks seems to indicate that economic slowdown fears may be somewhat overblown. And the outperformance of both NASDAQ and Transport stocks is bullish for the overall market in the short and medium term.

Price Headley is the founder and chief analyst of BigTrends.com.